"The precious metal markets are a firestorm of buyers...and they have sucked the pipeline clean"

¤ Yesterday In Gold & Silver

Gold traded flat when it opened in New York on Sunday night...but early in Tokyo trading on their Monday morning, the price jumped up about ten bucks...and stayed there until 10:00 a.m. in London, where it jumped up a few more times, but ran into the proverbial brick wall shortly after 12:00 o'clock noon BST.

From that high, gold got sold down about twenty-five bucks...hitting it New York low at 10:30 a.m. Eastern time. After that, it slowly gained back some of that loss by 2:00 p.m...and then didn't do much going into the 5:15 p.m. close of electronic trading.

Gold closed the Monday trading session at $1426.30 spot...up $19.80 on the day. Gross volume was around 199,000 contracts...with a large chunk of that occurring early in the trading day...up until the London high of the day.

Silver's price pattern was similar, but the rally into the noon hour London high wasn't anywhere near as impressive as gold's. After that high tick, the silver price pretty much followed the gold price pattern.

Silver closed at $23.41 spot...up a whole 13 cents from Friday's close. Volume, net of roll-overs out of the May contract, was only 32,500 contracts.

The dollar index closed on Friday at 82.77...and gapped down about 10 basis points as soon as trading opened on Sunday night in New York. After that, it rallied to its high of the day...82.89...which came at the open of equity trading in New York...9:30 a.m. Eastern time. From there it got sold off into the close...finishing the Monday session at 82.65...down 12 basis points on the day.

A cursory glance at the gold and silver charts from yesterday shows no correlation between the precious metals and the dollar index.

Although gold's low came at 10:30 a.m. in New York, the gold shares didn't hit their nadir until 12:15 p.m. Eastern. After that they rallied weakly along with the gold price...and then traded sideways after 2:00 p.m. Eastern time. The HUI finished up 1.49%.

For whatever reason, the CME Daily Delivery Report was never updated from Friday's data. I'm looking at the correct page on their website at ten minutes before midnight Eastern Daylight time...and it has not been updated. Normally it's updated by 10:00 p.m. Eastern.

Well, the finally did the update, but it was after midnight Eastern time before the got around to it. I discovered it around 4:30 a.m. Eastern when I was doing the final edit. The report showed that 43 gold and 11 silver contracts were posted for delivery tomorrow...and the link to the current Issuers and Stoppers Report is here.

GLD took another big hit yesterday, as 589,959 troy ounces were reported withdrawn yesterday...and as of 11:55 p.m. Eastern time last night, there were no reported changes in SLV.

There was a decent sales report from the U.S. Mint yesterday. They sold 7,500 ounces of gold eagles...7,000 one-ounce 24K gold buffaloes...and 681,000 silver eagles.

Over at the Comex-approved depositories on Friday, they didn't report receiving any silver...but they shipped 702,149 troy ounces of the stuff out the door. The link to that activity is here.

Monday was another busy sales day at the store...but not quite as busy as Friday. Gold sales were really strong, as one customer came in and ordered an eye-watering amount of gold maple leafs. We still only have 100 oz. silver bars for sale...and there was still no change from the mints or the wholesalers, as none of them are taking orders.

Here's a chart that reader Richard Sypher sent my way yesterday. He borrowed it from yesterday's edition of the "Daily Pfennig"..and I thank him for it.

Here's your "cute quota" for the day...

Being a Tuesday, I have lots of stories from the weekend...and a goodly portion of them are gold related and well worth reading, so I hope you can find the time to spend on them.

¤ Critical Reads

U.S. banks won’t be rescued by taxpayers, U.S. Treasury Department official Mary Miller said, rebutting investor skepticism that some lenders are too large to be allowed to fail.

“A common use of the too-big-to-fail shorthand is the notion that the government will bail a company out if it is in danger of collapse because its failure would otherwise have too great a negative impact,” Miller, the Treasury’s undersecretary for domestic finance, said in remarks prepared for a speech in New York late Thursday. “With respect to this understanding of too-big-to-fail, let me be very clear: It is wrong.”

A debate from Washington to Wall Street over whether the Dodd-Frank financial overhaul law ends bailouts was re-energized after U.S. Attorney General Eric Holder said last month that the size of the largest banks has made it difficult for the Justice Department to bring criminal charges when there is wrongdoing.

“No financial institution, regardless of its size, will be bailed out by taxpayers again,” Miller said at a conference in New York. “Shareholders of failed companies will be wiped out; creditors will absorb losses; culpable management will not be retained and may have their compensation clawed back.”

The moneynews.com news item from last Thursday falls into "I'll believe it when I see it" category...and I thank West Virginia reader Elliot Simon for today's first story.

From pristine beaches to palaces, entire islands and its London embassy, a nation in crisis is selling its assets, writes Harriet Alexander.

The sale of the coast at Afandou is part of the Greek government's desperate attempts to raise money by privatising its vast portfolio of state-owned assets – the largest fire sale in history. Some 70,000 lots are for sale, ranging from pristine stretches of coast through to royal palaces, marinas, thermal baths, ski resorts and entire islands. Only last Wednesday, bidding closed for a stake in the state gambling company.

On Rhodes, a mountainous island 50 miles long that was the mythical home of the sun god Apollo, huge chunks of prime real estate are now up for grabs. Beside the 1,850-hectare Afandou estate there is the peninsula of Prasonisi, a paradise for windsurfers, and the Mandraki marina in Rhodes Town, where the famous Colossus, a 100 foot high statue that was one of the seven wonders of the ancient world, once stood guard over the port entrance.

This interesting article appeared in The Telegraph at 6:00 p.m. BST on Saturday evening...and it's Roy Stephens' first offering of the day.

With European policymakers and politicians increasingly split over whether to relax austerity measures, Mr Deripaska, who controls Rusal, the world’s biggest aluminium producer, said that the turmoil and high value of the euro meant his business would steer clear of investing in the eurozone.

“We need to be practical,” he says in an interview with The Daily Telegraph. “With the high euro and the state of the markets in Europe, it wouldn’t be reasonable to go anywhere near buying something significant in Europe at this moment.”

Mr Deripaska, who is estimated to be worth $8.5bn (£5.58bn) in the latest Forbes rich list, making him Russia’s 16th richest man, says he fails to comprehend what makes the euro 45pc more valuable against the dollar than it was at launch in 2002.

This story was posted on the telegraph.co.uk Internet site late on Sunday evening BST...and it's courtesy of Roy Stephens.

In the latest blow to Brussels’ key policy, Luc Frieden, who is also a governor of the World Bank, aid Luxembourg was “very sympathetic” to the UK’s objections and pledged to support its bid to block the FTT.

“We will certainly bring arguments in support of the case being brought by the UK government,” Mr Frieden told the City Week forum, a financial services conference in London.

Thomas Donohue, the chief executive of the US Chamber of Commerce, was even more forceful. “I have news for you: we will not allow the FTT to happen,” he said at the same conference.

Like Cyprus, tiny Luxembourg is a banking Mecca as well and, for obvious reasons, it's opposed to this EU-proposed Financial Transaction Tax. This is another story from Roy Stephens...and it, too, was posted on The Telegraph's website...this one from 3:00 p.m. BST yesterday.

Two interest rate benchmarks that banks were fined for rigging should be scrapped and replaced by indicators based on market transactions, a top U.S. regulator said on Monday.

The changes should also include benchmarks linked to gold, oil and other commodities, said Gary Gensler, chairman of the Commodity Futures Trading Commission said.

Regulators from across the world are fleshing out changes to how two key interest rate benchmarks in particular, the London Interbank Offered Rate (LIBOR) and its continental European counterpart EURIBOR, are compiled.

This short Reuters story, filed from London, was posted on their website early yesterday afternoon Eastern Daylight Time...and it's courtesy of U.A.E. reader Laurent-Patrick Gally.

A few weeks ago, GoldMoney research director Alasdair Macleod gave a lecture in honor of the classical economist Adam Smith, arguing that infinite government strangles the productive capacity of society and that fiat currency destroys economic calculation and private-sector wealth.

True enough, but wasn't that the objective all along?

Macleod's commentary is headlined "My Adam Smith Lecture" and it's posted at GoldMoney's Internet site. I found this posted in a GATA release yesterday...and I thank Chris Powell for writing the preamble for us. It's definitely worth reading.

Last week the International Monetary Fund reduced its global growth forecast and reiterated its call for some European countries to reduce their austerity drives. The harsh conditions imposed on bailout countries, most recently in Cyprus for example, have been vividly evident in affected countries. What has caused the IMF to change its view?

Late last year the IMF made a striking admission in its new World Economic Outlook. The IMF’s chief economist, Olivier Blanchard, explained that recent efforts by countries to shrink their deficits through tax hikes and spending cuts have been causing far more economic damage than the experts had previously assumed. IMF forecasts for countries that pursued large austerity programs had consistently been too optimistic. Conversely, countries that engaged in stimulus effort, such as Germany and Austria, did better than expected. As it turns out, a $1 cut in a budget will result in between a $0.90 to $1.70 dollar cut in GDP, rather than the $0.50 the IMF had previously assumed.1 If true, governments globally should be focused on pursuing stimulus measures to boost growth, rather than insisting on major budget cuts.

In economic parlance, the new findings suggest that the fiscal multipliers are higher than anyone had previously estimated. Whoops… sorry Greece, Portugal and Ireland. Perhaps those budget cuts that were imposed as conditions of your bailouts were misplaced. This is a major finding from the body that structures bailouts for countries, but the evidence doesn’t stop there.

This short commentary by David was posted on the sprottgroup.com Internet site yesterday...and is worth reading as well.

Typically, gold traders have reported a massive jump in sales on the occasion of Gurupushyamrut, or Pushya Nakshatra on Thursday, considered an auspicious day for gold buying. Though the sales figures have yet to come in, retailers have seen good footfalls at their stores.

Gold buyers have been waiting in the wings to make the most of the dramatic fall in gold prices, and the run of festivals this week is turning out to be an occasion to buy.

In the last three days alone, jewellers have reported sales of around 15 tonnes of gold, double the normal sales. Jewellers expect the trend to continue from Thursday into Friday, April 19th.

This news item was filed from Mumbai on Friday...and was posted on the mineweb.com Internet site. I found this story all by myself!

Gold bars have sold out and gold accessories are going fast at the Caishikou Department Store, the largest gold dealer in downtown Beijing.

"No gold bars are available. Customers who have paid can pick up their bars in one week," said a notice posted at the store's gold sales counter.

Gold had almost exclusively been purchased by wealthy Chinese before the prices plummeted. But with prices dropping significantly, those with lesser means have seen an opportunity to invest in the metal themselves.

"I couldn't wait to buy gold. Many of my colleagues and friends have already made their purchases," said Zhang Jiang, a Beijinger who bought two gold necklaces and a five-ounce gold bar.

This excellent story was filed from Beijing...and posted on the chinadaily.com.cn Internet site on Saturday morning local time...and I thank Hong Kong reader Graham C. for bringing it to my attention...and now to yours.

As we noted last week, all around the world the demand for physical precious metals has soared in the days following paper gold's price collapse. As the FT reports, from Shanghai and Hong Kong to India, one dealer noted, "Older members who have been in the business for 50 years haven’t seen such a thing." The feverish buying has left many of Hong Kong's banks, jewelers, and even its gold exchange without enough gold to meet demand.

Record volumes on Shanghai's exchange, lines outside Beijing jewelry stores, and the proximity of Hindu festivals drove "Indian physical demand and premiums," higher as the worlds two largest gold buying nations prompted one exchange CEO to note that we hadn't, "seen this kind of gold rush in over 20 years."

It would seem the concerted effort to collapse paper prices in London and New York has provided the rest of the world a multi-decade buying opportunity.

This piece showed up on the Zero Hedge website yesterday...and I thank Elliot Simon for sending it along. The original Financial Times story from which this ZH piece was derived, is posted in the clear in this GATA release...and is linked here.

The crash of the price of paper gold on Monday has unleashed an unprecedented global frenzy to buy physical gold and silver. All over the planet, people are recognizing that this is a unique opportunity to be able to acquire large amounts of gold and silver at a bargain price. So precious metals dealers now find themselves being overwhelmed with orders in the United States, in Canada, in Europe and over in Asia.

Will this massive run on physical gold and silver soon lead to widespread shortages of those metals? Instead of frightening people away from gold and silver, the takedown of paper gold seems to have had just the opposite effect. People just can't seem to get enough physical gold and silver right now. Those that wish that they had gotten into gold when it was less than $1400 an ounce are able to do so now, and it is absolutely insane that silver is sitting at about $23 an ounce. If the big banks continue to play games with the price of gold, we are going to see existing supplies of physical gold and silver dry up very quickly.

Well, they are now gone. This Zero Hedge piece from Saturday was sent to me by reader Marshall Angeles.

In a sea of unfounded opinions, the only thing missing so far has been an informed opinion on what is really happening in some market - be it the paper of physical, especially in the aftermath of the unprecedented scramble to buy physical, not paper, gold and silver.

So to avoid further speculation, and focusing on fact, here is what the CEO of Texas Precious Metals has to say about the state of the actual physical market, not the one where one can create "gold" and "silver" out of thin air. The bottom line? "The physical silver market is, in a word, ugly" and more importantly, "Last week, we turned away business in excess of 100,000 ozs of silver because of stock depletion." Bottom line: please keep selling your paper metals - the demand in the physical space has never been greater, and is absorbing all the available inventory at current prices.

This letter from the CEO of Texas Precious Metals to their customers falls into the absolute must read category...and I thank Marshall Angeles for sharing it with us.

The United States Mint has the production capacity to strike between 50 million and 60 million American Eagle silver bullion coins annually to meet demand, but ongoing inability to secure sufficient planchets stifles full use of that capacity.

Deputy U.S. Mint Director Richard A. Peterson told Coin World April 18 that the bureau is struggling with a lack of success in its efforts to find additional planchet suppliers. Currently, the Mint secures finished planchets from Sunshine Mint in Couer d’Alene, Idaho; Vennerbeck Stern-Leach in Lincoln, R.I.; and GSM Metals in Cranston, R.I.

Peterson said the West Point and San Francisco Mints combined are striking an average of 800,000 American Eagle silver bullion coins weekly. The San Francisco Mint is executing roughly 15 to 20 percent of the overall production.

Peterson said the distribution of production fluctuates depending on other demands at the West Point Mint. More production can be diverted to the San Francisco facility on weeks that the West Point Mint is producing coins for other programs, Peterson said.

This behind-the-scenes look at American silver eagle production makes for a very interesting read...and it's definitely worth your time, if you have it.

Theories about what triggered gold's recent drop are “cover stories,” says Chris Powell, co-founder of the Gold Anti-Trust Action Committee (GATA), an organization focused on exposing, opposing and litigating against collusion to control the price and supply of gold and related financial instruments.

The reason the metal fell was because central banks stepped in and gutted gold prices to avert a short squeeze in London, he noted.

Nobody sells gold like that in order to make a profit on a long-term gold holding,” he told Yahoo.

“I'm pretty confident that it was a central bank operation. I can't prove it, but too much gold paper was dumped for the crash to be a natural event,” he added.

This moneynews.com story was posted on their Internet site early Friday morning...and is courtesy of Elliot Simon.

More than a week after the spectacular attack on gold began, the World Gold Council, nominally the representative of gold mining companies and gold investors, has grudgingly taken note of it with a statement dated Thursday and issued Friday by the council's chief executive officer, Aram Shismanian.

"It has become increasingly clear over the course of the past week," Shishmanian said, "that the fall in the gold price was triggered by speculative traders operating in the futures markets. Their short-term view of generating a trading profit is in stark contrast to the views of long-term investors in gold, as evidenced by the massive wave of physical gold buying that began over the weekend and accelerated following Mondays further decline. The surge in gold purchases is spanning markets from India and China to the United States, Japan, and Europe. Buyers are viewing this as an opportunity to purchase gold at prices not seen in the past couple of years."

Chris Powell really tees up the WGC...and rightly so. There's more in this GATA release from yesterday...and I consider it a must read.

"It is in the interest of any government that wields a monopoly control over the issuance of fiat currency to restrain gold," Davies writes. "A rising gold price signals the debasement -- that is, over-issuance -- of paper money. It is this over-issuance that enslaves you to remain a wage slave until your dying days -- no retirement plans for you at the beach -- as your disposable income and savings are eroded out of existence.

"By suppressing the gold price and reweighting growth and inflation indices to mask the effects of rising prices, a government can maintain stable and lower yields in the domestic sovereign bond markets, thus enabling government to have a virtually endless supply of paper money. Remember, currency in circulation is created by central bank purchases of government debt, which then helps supply the financial system with money and credit.

..."Gold "has been at the mercy of a state-engineered correction using the threat of coerced European gold sales to scare holders into selling, and speculators jumped gleefully on the bandwagon.

I found this story in another GATA release from yesterday...and it was posted on the hindecapital.com Internet site yesterday.

Bud Conrad, chief economist for Casey Research, writes today that the recent plunge in gold prices seems to have been engineered by a single large participant in the market.

Conrad writes: "We don't have the name of the entity that did this. However, the way the gold was sold all at once suggests that the goal was not to get the best price. An investor with a position of this size should have been smart enough to use sensible trading tactics, issuing much smaller sell orders over a period of time. This would avoid swamping the market; and some of the orders would be filled at higher prices and thus generate more profit. Placing a sell order big enough to affect the overall market price suggests that someone with powerful backing wanted to drive the price of gold down.

This commentary from Bud was posted in yesterday's edition of the Casey Daily Dispatch...and it's definitely worth running through...as is the introduction by Louis James.

In the latest edition of his "Things That Make You Go Hmmm..." newsletter, Grant Williams of Vulpes Investment Management in Singapore joins the lengthening line of market analysts who think something is fishy about the recent gold price plunge, a line almost as long as the lines in front of gold shops in Asia.

Williams writes: "During my 30-odd years in finance, I have somehow weaved my way through many crashes, beginning with the 1987 stock market crash and including LTCM, NASDAQ, the Asian Currency Crisis, the Mexican Tequila Crisis, 9/11, and everything in between, and I can promise you that not a single one of those crashes, collapses, or crises ended up with retail investors stampeding to buy the asset that was supposedly cratering."

He adds: "Now, far be it from me to suggest that the central bankers of the world had any sort of hand in crashing the gold price -- I mean they are all such fine, upstanding servants of the public good and are definitely not short physical gold -- but said crash certainly doesn't hurt their desire to amp up the printing presses. ..."

Williams' letter is titled "Bulls Hit" and it was posted at the Mauldin Economics Internet site yesterday...and is today's headline story...and for very good reason, as it's a must read for sure. I thank reader Bob Tankel for being the first one through the door with this amazing essay.

¤ The Funnies

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¤ The Wrap

Obviously the U.S. Mint can’t keep up with demand for Silver Eagles...placing it in violation of the law which mandates enough bullion Silver and Gold Eagles must be produced to satisfy demand. But man-made laws can’t trump the law of supply and demand indefinitely. Many are still quick to point out that any silver shortage is confined to a number of retail forms of silver and not in the wholesale industry standard form of 1,000 oz bars. That seems to be true, but the silver retail shortage is burning intensely and the winds are strong and the firebreak separating retail and wholesale are more likely than ever to be breached. The simple fact is that these retail silver shortages have been flaring up on a recurring basis over the past few years and the current one is the strongest one yet. From everything I've observed, the retail shortage is bound to intensify...and I won’t keep it a secret as to what is the underlying cause - the price of silver is too low. - Silver analyst Ted Butler...20 April 2013

In a bifurcated market such as this one, it's always hard to determine whether the hourly and daily charts for gold or silver are remotely close to free markets. At times they have characteristics of a free market...but then a not-for-profit seller shows up...and that's it for the day...with yesterday's price action in both gold and silver being another case in point.

As Ted mentioned in his quote above, the silver price is too low...way too low...and so is gold. And as Grant Williams so exquisitely put it in his commentary posted above..."I can promise you that not a single one of those crashes, collapses, or crises ended up with retail investors stampeding to buy the asset that was supposedly cratering."

As the stories in the 'Crticial Read' section have pointed out...the precious metal markets are a firestorm of buyers...and they have sucked the pipeline clean of all precious metals world-wide over the last week. It will take many months to fill it again, if it can be done at all, especially if JPMorgan Chase et al continue to keep the precious metals at these giveaway prices.

We're still only selling 100 oz. silver bars at the store, as that's all we can get...and I'd bet that even this tiny window that we have into the silver market will disappear soon. There's nothing to buy anywhere, unless you want to pay a huge premium on e-bay.

Well, the Commitment of Traders Report was not changed yesterday, so I doubt very much if it will be until Friday's COT Report. At that point we'll find out whether this now-obvious false reporting from last week will be rectified at that point...or have JPMorgan Chase and the CME Group corrupted this report permanently? We'll find out soon enough.

This bifurcated market cannot...and will not last. The total disconnect between the paper market price and the physical market price has to resolved...and resolved quickly...as the pressure on physical demand has gone supernova. Now that this fire is lit, it will be self-sustaining until prices change...and change drastically.

The bullion banks and central banks are really up against it now...and have been caught in a trap of their own making...a plan that literally blew up in their faces. They discovered in a real hurry that the buyers of 2013 were wise to them...and didn't react the way they had back in 2011 when "da boyz" pulled this same stunt.

If there every was a time for the world's central banks to mark up the prices of all the precious metals [plus copper and crude oil] this would be the time to do it. But in order to kill demand in precious metals stone-cold dead...it will take a big price adjustment to do it...and that's why they're going all-out to rid themselves of as much of their short positions [and/or go long] in these six commodities as they can. And that's why the last COT report was a fabrication, as they don't want anyone to see what progress they're making.

I note that all four precious metals came under selling pressure in the thinly-traded and highly illiquid Far East trading session on their Tuesday, with the lows coming just moments before 3:00 p.m. in Hong Kong...which was just moments before the 8:00 a.m. BST London open. As of 3:30 a.m. Eastern time, gross volumes are already very chunky in gold...over 44,000 contracts...and over 12,000 contracts [net] in silver. The high-frequency traders are definitely out and about.

And as I hit the 'send' button at 5:10 a.m. Eastern time, I see that "Da Boyz" continued to be active even past the London open...and it should come as no surprise to you, dear reader, that silver was hit the hardest once again. As you already know, this precious metal is the biggest problem child of JPMorgan Chase, Canada's Bank of Nova Scotia...and HSBC USA. Gold is down about eleven bucks...and silver is down 65 cents..but was down over 80 cents at its 8:55 a.m. BST low. Gold's gross volume is now north of 58,000 contracts...and silver's net volume is just above the 15,000 contract mark. The dollar index dipped about 15 basis points going into the London open...and then blasted skyward. It's just an eyelash above the 83.00 mark as I write this.

I'm watching the current situation with morbid fascination and, like everyone else out there, I'm making things up as I go along, as this really is a Star Trek-type of precious metals market. Right now we're only at Warp Factor 1...but I don't expect that to last too much longer.

The rest of today's trading action, once we get past the noon silver fix in London, should prove interesting.